Insurance Claims and Bad Faith Law Blog

Primary Carrier Good Faith: ....

                  "It's Not Just For A Policyholder Any More!"  Is It?

     A new case decided on Valentine's Day, 2007 forges new law and also  presents an apparent new conflict in Florida Insurance Law:  Progressive American Insurance Co. v. Nationwide Insurance Co. (Fla. 1st DCA Case No. 1D06-2159, Opinion Filed February 14, 2007).   That short case  -- the entire decision is concisely printed in 3 paragraphs -- involves two Liability Insurance Companies, both with a duty to defend except for one thing.  When the Court compares their "other insurance" clauses, one Insurance Company's Policy makes it "excess" by comparison while the other Policy is "primary" by comparison.

     On these basic facts, the conclusion in this decision is the distinct minority position across the United States.  This issue has been addressed many times by Courts, parties and their counsel including me over the years.

     Back to the new decision at hand.  In it, a distinguished panel of Florida's First District Court of Appeal applied a widely held rule of what is called "equitable subrogation".  Under this universal rule, an Excess Carrier pays indemnity under the Policy it issued to the Policyholder and thereby gets to stand in the shoes of the Insured-Policyholder.  That means that the paying Excess Carrier gets the ability to assert the same rights against, and to claim the same obligations from the Insured's Primary Carrier, that the Insured-Policyholder has.

     That includes the right if any that the Insured-Policyholder has to claim that the Primary Carrier did not act in Good Faith toward the Insured.  The Court in the new decision ended with a conclusion that is very different from this universal rule, however:  "Therefore, [the Primary Carrier] owed [the Excess Carrier in this case] a duty of good faith."

     The vast majority view to the contrary is discussed at length in, for example, Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith Ch. 6 and Ch. 7 (West Publishing Co. 2d Edition 1994, 2007 Supplement in Process).  I represented a Primary Carrier in an earlier case with a different result and an apparently conflicting decision by the same First District Court of Appeal.   The conflicting holding is not cited in the new decision, the oldest citation in it being to a case decided in 1985:  "We further find [the Primary Carrier's] remaining claim that [the Insured's Excess Carrier] owes a direct duty to [the Primary Carrier] not cognizable under Florida law."  Hartford Accident & Indemnity Co. v. Travelers Indemnity Co., 554 So. 2d 559, 560 (1st DCA 1989)[emphasis added], review denied, 564 So. 2d 1086 (Fla. 1990).

     It will be interesting to see how the First District Court of Appeal and other Florida Courts resolve the apparent conflict.  It will be significant whether Florida Insurance Law stays in the majority column or joins the tiny minority on this narrow but national issue.

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Primary and Excess Flood Insurance ... And CatClaim Computer Models.

   Chubb has just issued a Press Release announcing that in addition to its Primary Flood Insurance offering, "Chubb Introduces Broad Excess Flood Policy ...."  Link to the Chubb December 20, 2006 Press Release here.

    A valuable gift is given us at this time of the rolling year, by taking a closer look at where Chubb is going.  A concise and valuable education is available in Coverage issues for Catastrophe Claims and what to offer to address and relieve them, as perceived by one of the world's leading Insurance Companies.  Chubb currently offers Primary Flood Insurance in 20 States in the United States.  Chubb's Primary offering is both broader in potential Coverage than the mainstay Federal Flood Insurance Policy provisions, and it offers much higher Policy Limits:  $15,000,000.00 in Home and Contents Coverage, attractive to high-tax-bracket Policyholders.

    The new Excess Flood Insurance Policy offered by Chubb will be made available in 15 of the 20 States in which the Primary Flood Policy is offered.  In the future, more States will receive the Excess offering, according to the linked Press Release. 

   Imagine a map of the United States with me for a moment.  10 of the 20 States where Chubb offers it Primary Flood Insurance are located inland.  These are places where rivers and lakes are likely to be the primary sources of flooding, such as Illinois, Missouri, and Pennsylvania.  8  States in this group are located on the Atlantic Coast.  Florida is the only State located on the Gulf Coast, and Florida is the only State on the list which is located on the Atlantic Coast south of Virginia.   Finally, 2 States on the Pacific Coast are on Chubb's Primary offering list.   15 of these 20 States make the cut for Chubb's Excess Flood offering:  Currently, Arizona, Colorado, Idaho, Ohio and Utah do not.

   Anyone would ask why, with several Insurance Companies refusing to tread where many different kinds of Claim risks are associated with Hurricanes and other Catastrophes -- such as from Wind -- why is Chubb, an admittedly bright group of people, offering any sort of new Coverage that would be available only in the event of a Catastrophe?

   One reason appears in a newspaper report apparently based at least in part on Chubb's linked Press Release, above.  The newspaper report contains a quote that is not found in the Press Release, along with other additional and useful information.  Stated on Web Site as Available ONLY TO WALL STREET JOURNAL ONLINE SUBSCRIBERS:  Lavonne Kuykendall, "Chubb to Offer Flood Insurance for Some Upscale Coastal Customers" (Wall Street Journal, Thursday, December 21, 2006, p. D2, col. 1).    In the newspaper report, Chubb's spokesperson who was responsible for rolling out this new Flood Insurance product is quoted as stating that some other Insurance Carriers are adjusting their offerings because those other Insurance Carriers are relying on "'new catastrophe models'" which suggest that "'they are more exposed than they thought they were.'"  In other words, Chubb is basing its projections and thus its new Flood Insurance offerings on the reliable fact-based Computer Model for Hurricanes and other Catastrophes.

   The clear and obvious result of some, but by no means all other Insurance Companies, buying in to a new 'model' based instead on opinions about past and future claims is that those other Insurance Companies are adjusting their own offerings down. 

   Hoping for protection to All which addresses Catastrophes in the United States and the World, Happy Holidays to All!

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

 

 

When a Primary Carrier Becomes Excess ....

                     Then the Excess-Once-Primary Becomes the Insured!
                                                            
    Federal District Judges have to decide State Law Questions.  It is not easy because they are not State Court Judges.  Still, what Federal Judges say usually counts for something.  Sometimes even in Insurance, if not always.  A recent example comes from the decision in the case of St. Paul Fire & Marine Insurance Co. v. Lexington Insurance Co., 2006 WL 1295408 (S.D. Fla. Case No. 05-80230-CIV Opinion Filed April 4, 2006)(subscription required), Download St. Paul v. Lexington (S.D. Fla. April 4, 2006).pdf.

    In St. Paul v. Lexington both insurance companies had what the Federal  District Judge called "virtually identical" provisions that made them both primary.  Nonetheless, in the space of about 6 pages the Federal Court made Lexington primary, and St. Paul excess.

    This involved St. Paul having a right of "equitable subrogation" against Lexington by which St. Paul stood in the shoes of the insureds "and assumes the rights of those insureds."  In other words, St. Paul became the insureds because of equitable subrogation.

    Then the Federal Court put this holding into action.  Lexington should have defended the lawsuit against the real insureds, said the Federal Court, "in good faith, and, at a minimum, to give notice to St. Paul as the following carrier of the critical aspects of the case as it progressed."  The problem there is that when equitable subrogation is involved, the case against the insureds is always over.    Which it was.

    When the case against the insured is over, there is, at a minimum, nothing to give notice about because nothing is happening.  Not notice to anyone, including a "following carrier" whatever that may mean.  Much less to give notice about "critical aspects" since those are not happening, either, of course.
   
    St. Paul v. Lexington is a Federal Court's honest answer with undoubtedly good intentions to address Florida Insurance Law Questions decided otherwise in other cases in Florida State Courts.  St. Paul and Lexington are doubtless bound by the result in the Federal case regardless.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.